One of the distressing things about low volume markets is when prices tank for no apparent reason, but when prices go the other way it sure can be fun.
Gold was up $16.09 in early trading to $1,635.19 and silver was up $0.44 to $29.14 dropping the silver/gold ratio all the way to 56.1. The numbers are going up so fast that even my ticker is behind this morning.
Commodities rallied after a strong recovery by the euro on currency markets as investment money is starting to flow back into Europe on hopes of better days. Joining gold and silver higher were platinum, palladium, crude oil and copper. It’s hard to find a dark spot on the commodities markets this morning.
This kind of a run is going to signal that precious metals are in play once again and attract the attention of big investors and we could easily see prices continue higher from here.
My advice to retail investors is to stay clear of this rally. The time to buy was last month when prices were in the $1,580 range. You might be thinking that I just said gold could go higher from here! That’s right, it can and probably will, but stay out of it. It’s a losing investment strategy to chase rallies, even though your brain is screaming at you to get in on the action. Maybe that impulse to join rallies is a throwback to when our ancient ancestors joined a feeding frenzy and that’s how the instinct manifests itself today.
How high could gold prices go? Potentially another $100 an ounce from where we are, or more. A lot depends on the news from Europe and when profit taking kicks in. There will be profit taking. If prices go over $1,700, I may be one of those people locking in some profits.
When markets are this volatile nothing is guaranteed. Due to the volumes we’re looking at, we could just as easily have a repeat of last week. We had a rally early in the week, a big crash later and ended on a small loss for the week.
I think we’re more likely to hold prices over $1,620 going forward. There’s been an underlying bullish trend to the numbers for some time, yet prices have stayed stubbornly low, so don’t get confused between a rally and a sudden return to normality.
We’ll know as the week goes on if this is an upward correction or a real rally. Either way, now’s the time to throw in your cards and stay out of the way as the elephants dance.